Article excerpt

In 1476, William Caxton established the first printing press in England.

It took him a year to get his first book out and while history does not record whether it was a smash, by 1590, toward the end of the reign of Elizabeth I, more than 250 books were being published every year. This was the white heat of technology and it ignited an explosion of knowledge and political discourse across Europe that changed the course of that civilisation.

In 1993, the first graphical web browser was launched. Later that year, the first commercial website, for the Digital Equipment Corp, was launched, and within just seven years, there were 17.5m websites Fast-forward five years, through the dotcom crash, and there were 65m websites.

When printing came to Britain, the change it wrought was far-reaching, but gradual. The change we are experiencing now is just as far-reaching, but immeasurably faster. The internet has caused markets to be created, subverted and destroyed. It has introduced competitors, fresh business models and new channels to market. The ability it gives people to communicate and share information has caused an unprecedented surge in creativity and innovation in businesses, as people rush to take advantage of new opportunities and others scurry to defend positions.

Ten years ago, we typically looked at sources of sustainable competitive advantage in terms of processes and functional components of the business mix - the ability to make widgets cheaper because of a patent or through the control of particular channels to market.

Now we need to look deeper to see where organisations' winning characteristics lie. In this era of hypercompetition, firms increasingly derive advantages from the skills they deploy - and in a period of intense change, the most important is the ability to innovate.

This trend has already begun, spurred on by globalisation, consumer choice and deregulation. But the internet has accelerated it and multiplied its effects.

The capacity to evolve rapidly to thrive in new market environments, to respond to fresh consumer demand and to exploit new models is what sets the winners apart. Google adopted a charging model from a competitor, but added it to a superior search product; eBay exploited the power of online community by adding it to an auction site; and Amazon invented the affiliate market, beating wealthier competitors by creating huge distribution at minimal cost.

These companies demonstrate an ability to innovate, and each prizes its ability to do so over time, devoting significant resource to the continuous development of new products. …